FuelCell Energy, Inc. (NasdaqGM:FCEL), a manufacturer of stationary fuel cell power plants, announced results for its 2007 first fiscal quarter ended January 31, 2007.
Revenues rose to $6.8 million from $5.9 million in Q1 06; research and development contract revenue was $1.9 million compared to $2.9 million.
Product backlog, including long-term service agreements, increased to $36.7 million, compared to $24.5 million for Q1 2006, primarily from orders for megawatt-class products and service contracts.
R. Daniel Brdar, FuelCell Energy’s CEO said, “Over the last several months we have made significant measurable progress toward our goal of increasing our penetration in repeatable and multi-megawatt markets. We closed the strategic alliance with POSCO Power, a leader in independent power generation, which not only significantly improves our strategic position in Asia through a 10-year manufacturing and distribution agreement in South Korea with an experienced producer and developer of power plants, but also brings FuelCell Energy a key strategic investor through an investment of $29 million. As important, we continue to achieve our cost-out objectives and prepare the Company to execute a higher volume of orders.’
The net loss to common shareholders for the first quarter was $20.0 million or $0.38 per basic and diluted share, compared to a net loss to common shareholders of $16.7 million or $0.34 per basic and diluted share in the same quarter last year. The higher loss is due to an increase in inventory related to DFC1500MA and DFC3000MA products and long lead components which are adjusted on receipt to net realizable value and an increase in research and development focused on cost reduction related to our multi-megawatt (MW) product.
Multi-MW and Repeatable Market Penetration
Asia
In February, FuelCell Energy announced that it had signed a 10-year manufacturing and distribution agreement with POSCO Power, Korea’s largest independent power producer and a subsidiary of POSCO, one of the world’s largest steelmakers. For a period of one to two years, FuelCell Energy will sell complete Direct FuelCell(r) (DFC(r)) power plants to POSCO Power. It is then anticipated that POSCO Power will manufacture its own balance of plants in South Korea using its own design, procurement and manufacturing while still procuring the fuel cell module from the Company. FuelCell Energy will receive a 4.1 percent royalty on POSCO Power’s balance of plant sales.
In March, POSCO Power ordered two DFC1500MA units totaling 2.4 MW for a grid-support application in South Korea. This installation will be the largest fuel cell power plant in the world and will export enough electricity to the grid to support 2,000 households. Korea’s
Cost Out Program
The Company added that 2007 cost-out initiatives, including value-engineering and global sourcing, are expected to reduce the design cost of its DFC300MA and DFC1500MA by 20 percent to $3,840/kW and $3,440/kW, respectively. Higher volume and additional technology improvements are expected to provide additional cost reductions.
“We are pleased to report that our cost-out program is on schedule,’ Brdar commented. “In 2006, in preparation to execute our multi-MW strategy, we reduced the cost of our DFC3000 to $3,250/kW. With the first of these power plants now being produced in 2007, volume production of our DFC3000 is expected to generate positive gross margin with a sales price under $3,000/kW.’
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